Supermarket private label products are rapidly gaining market share in Europe, intensifying competition for dairy producers and brands. According to Dairy Reporter, this trend is forcing companies to review their pricing strategies, innovation and marketing approaches.

Private labels are achieving a record market share

Over the past five years, the share of private-label products has grown steadily. In Europe’s six largest food markets—France, Germany, Italy, the Netherlands, Spain and the United Kingdom—they have reached 50% of sales for the first time.

In a number of countries, supermarket products already account for more than half of the market. Price remains the key factor, particularly against the backdrop of food inflation.

“Given that a standard shopping basket today costs as much as a premium basket did last year, consumers are being forced to make difficult decisions about which products to buy,” says Ananda Roy, Senior Vice President of Strategic Development Analytics at Circana.

In addition to price, private label products are expanding their range to include premium items and products that reflect healthy eating trends, particularly those high in protein.

Pricing strategy as a key factor

The growth of private-label brands is largely based on effective pricing. According to experts, price remains the key factor influencing consumer choice, and its importance will only increase in times of economic instability.

‘Pricing is about finding the sweet spot that lowers barriers, justifies value and actively encourages choice and purchase.’

Setting the right price requires an analysis of the elasticity of demand and consumer behaviour.

Innovation as a source of growth

Another important tool for brands is innovation. Launching new products that meet changing consumer demands remains a key driver of organic growth.

At the same time, the report emphasises the need for a strategic approach to innovation — from product format to pricing and target audience. This approach, known as pricing package architecture (PPA), enables companies to balance profitability with product appeal.

Promotions: striking a balance between sales and profit

Promotions remain an important tool in the battle for customers, but overuse of them can erode profit margins.

According to Circana:

  • 34% of brand sales are generated through promotions
  • for private label products, this figure stands at 14%

This suggests that brands are offering discounts more frequently, which could have a negative impact on profitability.

‘Instead, it is worth using targeted promotions based on loyalty data, retail media and consumer behaviour research.’

Market outlook

The growth of private-label brands is expected to continue against a backdrop of inflation, changes in global trade and the development of digital tools in the retail sector.

At the same time, brands are regaining some ground, which is slowing this trend down somewhat. Future competition in the dairy market will depend on producers’ ability to adapt to the new conditions and implement comprehensive development strategies.

Source: Dairy Reporter